Treasury, Government, Mortgage-Backed Securities, Corporate & Municipal Bonds

• Treasury securities
• Government agency and pass-through securities
• Corporate bonds
• Municipal bonds

Although every bond has similar characteristics such as the coupon rate, the face value, and the maturity date, the types of bonds in the market are very different among them.

Treasury notes and bonds are risk-free concerning credits and default; besides, some treasury notes and bonds offer protection against inflation. Municipal bonds provide their owners incomes through interests that are federal tax-exempt; mortgage bonds provide a regular payment of interests and the principal to its holders; and the junk bonds have the capacity of returning double-digit returns like stocks.

Not only these type of bonds differ from each other, so you also should search for information about the variety of features each issue of bond presents before buying.

When deciding about the type of bonds to buy, you should have in mind the reason why you would want to invest in them. Bonds are generally safer than stocks. They provide regular payments of incomes. However, bonds do not double their value overnight as so happened to some Internet and Biotechnology stocks in the late ‘90s. Bonds provide protection to your portfolio in case the stock market falls. Then, you buy bonds to insure yourself against great losses over the value of the portfolio and to provide yourself of a regular fixed income of cash.

What bonds should you buy? Municipal bonds offer advantages to taxpayers in high marginal tax brackets, and the Treasury bonds are the safest regarding credit and risk by default terms.

Although corporate bonds provide higher yields their quality of credit varies. Corporate junk bonds provide the highest yields, but also greater risks.